As organizations look across their enterprises and evaluate new solutions to help them make business processes more efficient, they are now focusing on product suites. These suites manage multiple enterprise processes within one integrated software solution. This means that integrating best-of-breed point solutions from multiple vendors is falling out of favor with end users. Organizations that select suite solutions have to deal with one vendor and one pricing structure, while best-of-breed solutions involving multiple vendors can lead to finger pointing and escalating integration costs. Ultimately, this movement to suite solutions will lead to consolidation in the market as customers opt to work with a handful of larger vendors that provide such solutions.
The aforementioned scenario may bring to mind the pre-Y2K ERP (enterprise resource planning) industry, but it's actually the findings of a January 2002 report by RCW Mirus on the state of the CRM (customer relationship management) industry. While the report focused on the CRM market, it again seems as though ERP vendors will be the beneficiaries if the report's claims come to fruition. The initial post-Y2K world was not kind to most ERP companies, but as the vendors weathered the storm, some developed CRM applications that complemented their install bases of enterprise solutions or stood alone as tier-one CRM applications. While Siebel Systems is still acknowledged as the CRM market share leader, AMR Research believes that lead is narrowing. "Essentially, [the CRM marketplace] is a four-horse race between Siebel, Oracle, PeopleSoft, and SAP," states the October 2001 AMR Research report, noting that three of the top four players in the CRM space have an ERP heritage.
ERP Install Base Is "Low-Hanging Fruit"
For ERP vendors that now offer CRM solutions, the most obvious selling point is the vendors' existing customer base. Not only is a customer relationship established, but the customer has already recognized - hopefully - the effectiveness of the vendor's ERP solution. "We have about 13,000 ERP customers. So, you can see how leveraging this install base opens up big opportunities for CRM sales," adds Guy Bardsley, CRM communications manager for SAP America. Similarly, PeopleSoft, which acquired CRM vendor Vantive in January 2000 and has since developed its own CRM solution, is benefiting from its install base. "Certainly, we consider those customers to be low-hanging fruit, and we put a great deal of effort into maintaining our current customer accounts and transitioning former Vantive users to PeopleSoft 8 CRM [PeopleSoft's latest CRM offering]," explains Robb Eklund, vice president of product marketing for PeopleSoft CRM.
"Doing An ERP On CRM"
While the install bases of ERP vendors offer huge opportunities, that does not mean that every SAP R/3 customer, for example, will blindly accept SAP's CRM solution. In fact, SAP R/3 users may already have some type of CRM solution in place. That means vendors such as SAP must either displace current CRM solutions or integrate with them. In terms of displacing current systems, it's not unlike the scenario ERP vendors faced 10 years ago. So, many of the present-day pitches will sound somewhat familiar - seamless integration, enterprise expertise, and verticalization.
"CRM has evolved beyond being just a very tactical automation of customer-facing business processes (e.g. sales, support, marketing). We're talking about doing an ERP on CRM, bringing continuity to these customer-facing business processes in the form of a strategic solution," comments Eklund. "To accomplish this objective, you need a broader understanding of the customer information that exists throughout the enterprise. That's a unique understanding that only a few vendors have." This "understanding" manifests itself in the form of CRM applications that bring together many different modular solutions and are offered by one vendor. This approach, for instance, leads to a logical integration of sales, marketing, support, supply chain, and financial systems. The value proposition is similar to that of ERP solutions - big efficiencies can be gained by unifying autonomous business processes.
Just as ERP vendors migrated their ERP products from horizontal to vertical, they are taking the same approach with CRM. In an effort to make their CRM solutions more relevant to specific industries, end users can expect to see vertical CRM solutions from ERP vendors - the financial and telecommunications markets are sure targets. All vertical solutions would contain the same core functionality, but would be tailored to handle the unique business processes found in a variety of different business categories.
One Wall-To-Wall Vendor: "That's Not Always Going To Happen"
Admittedly, the ERP and CRM story lines are similar, but there is a dramatic departure. With their ERP solutions, vendors typically replaced the legacy systems at end user sites - when SAP left, your company was running SAP (period). As these ERP vendors take their CRM solutions to end users, the landscape is different today. For example, at SAPPHIRE 2001, SAP America's annual e-business conference, one of the company's business partners was showing off an interface between SAP's CRM solution and J.D. Edwards' back end ERP solution. This emphasized that ERP vendors' CRM applications will not always be part of a wall-to-wall, one-vendor solution. "An SAP user may acquire several companies that are not running SAP, but the parent company wants to implement a CRM strategy across its entire enterprise. It would be nice to see the entire company standardize on SAP, but that's not always going to happen," states Bardsley. "That's why we have to offer a CRM product that stands on its own merits, one that can be integrated into different back end systems"
Looking at PeopleSoft's current sales numbers stresses Bardsley's point. According to Eklund, about 50% of PeopleSoft's CRM business is with new clients that are not existing PeopleSoft users. He further adds, "We put a tremendous amount of resources into making sure that our CRM solution was engineered to support extension into other solutions. We did that because we assumed PeopleSoft might not be the financial or supply chain system that is already in place at a customer site."